Mbl Share Discussion Threads

[davidosh] 22/10/2010 10:52

I suspect PC is using recent events to cloud his judgement on the time involved. There is absolutely no doubt that over the past few weeks he will have been spending at least 20% of his time and probably more on MUBL affairs but until say September I cannot imagine it was more than two hours in any week except when there are board meetings or announcements.

[arthur_lame_stocks] 22/10/2010 10:18

"I asked PC how much time he devoted to MBL and he and TA said that he was in telephone contact with TA virtually every day and that it would add up to more than 60 normal working days per year (so not the usual 10 days per year non-exec commitment)."

Check my maths, but if there are approx 240 working days in the year (48 weeks * 5 days a week) and PC spends 480 hours on the phone with TA (8 hours a working day * 60 days) then he's spending an average of 2 hours a day on the phone.

I don't believe that one for a moment.

[kimboy2] 21/10/2010 16:49

On the question of the last RNS there is nothing to prevent the directors being in concert with the offeree and the offeror.

The section 4 doesn't carry any implication concerning 'agreements, arrangements or understandings' regarding an MBO. It is just a rather clumsy way of presenting director shareholdings.

There isn't a glossary of terms under AIM rules regarding the word material, significant or substantial. However they must make sure that any information is not "misleading, false or deceptive and does not omit anything likely to affect the import of such information".

Unofficially I was told 10% was material.

It would be interesting to know who's idea the appointing of KPMG and the SR was. I believe 'discussions' were going on prior to their appointment and I don't believe that it particularly eases the path of an MBO. Perhaps PC insisted on it as a basis for a rational valuation as much as 'how to take the business forward'.

[deswalker] 21/10/2010 16:27

FWIW I have no clue what this Strategic Review is all about and especially why KPMG are involved at all. Has anyone ever seen such a situation elsewhere ?

Very strange IMO and the only reason I can think of for their involvement is to add a sense of legitimacy to the price offered in any MBO. I for one won't be buying their conclusions.

[miamisteve] 21/10/2010 16:16

Thanks Marben - taking them private would also shave off admin costs as well.

Absolutely ludicrous that the guy at kpmg wouldn't explain what the term material translates to. When someone asked on the cc he said look on the website, and I got the impression that he didn't actually know.

[maxcashflow] 21/10/2010 16:00

Thank you Marben, your post is very helpful.

[strollingmolby] 21/10/2010 15:54

Many thanks for detailing your thoughts from the AGM, Mark.

Re, the cash award for PC and time spent on MUBL matters, I can't imagine JD Sports shareholders would be thrilled to learn PC is spending 12 weeks a year on one of his other commitments.

That said if he did walk away, MUBL could not attract a similar 'heavyhitter' for the Chairman role, handing power straight back to the Allans. So for better or worse I'm glad he is here and hope (all) shareholders' interests is his main focus.

SM

[marben100] 21/10/2010 15:44

A further point I forgot to mention. Naturally, there was some discussion of PC's bonus. He pointed out that it represented a reward for work done since he joined the company, not a single year, as he had been expecting a share award which did not materialise. It should not be repeated in future years. I asked PC how much time he devoted to MBL and he and TA said that he was in telephone contact with TA virtually every day and that it would add up to more than 60 normal working days per year (so not the usual 10 days per year non-exec commitment).

Whilst, at the very least, the bonus award is poor presentationally, IMO PC does make a fair point when he suggests that you can't expect a FTSE250 CEO to put his reputation on the line and commit substantial time for £30K p.a. Nevertheless, I'd much the prefer the award to be in the form of shares or options than cash.

Mark

[meadow50] 21/10/2010 15:24

thanks Marben-useful insight

[deswalker] 21/10/2010 15:15

Thanks very much indeed marben.

[edmundshaw] 21/10/2010 14:46

Thanks marben, very interesting indeed.

[shanklin] 21/10/2010 14:00

Thank you marben100

[marben100] 21/10/2010 13:36

Folks,

I was one of the other two shareholders who attended the AGM (the third was also a PI, not an institution). Sorry but, as per Davidosh's comments, the meeting is not something that can be condensed into a short post. I'll do my best to help out. Another major issue is that some of the detail discussed was clearly commercially confidential and hence is unsuitable for publication on a public forum (including details about Sales Media Solutions).

Re the timing of the meeting, I was intending to complain about that, but must say that PC, TA and Lisa Clark were generous with their time. There was no attempt to cut questioning short and we were able to ask everything we wanted to. I'd rather have that, and have to spend an extra day travelling myself, than have to squeeze the meeting into a time slot/venue that was more shareholder-friendly but restricted the time for questioning.

Why the profits warning? Can't say I've got total clarity on that but the lack of exciting content releases this FY is certainly a big factor (Harry Potter titles last season were a big positive, for example). I asked about the likely impact of 3D. Management's view is that this would have a positive effect in Q3 next year. Given that we established that the largest proportion of MBL's revenues are from sales of games, this is clearly an important influence on future earnings. IMO 3D games content will become a "must have" for MBL's target audience - and clearly such content is impractical to download for the foreseeable future (as is Blue-ray). It has been my own view for a long time that the "threat" of online distribution has been overstated because new media formats have a habit of overtaking download speeds/capacities.

The KPMG representative was particularly unhelpful. I asked him how brokers would interpret the term "material" in the statement and he point blank refused to answer. I pointed out that this was an abolutely ludicrous situation, where "brokers" would know how to interpret the statement but ordinary shareholders are left in the dark. He did, however, state that there were three terms used in such statements: "material", "significant" and "substantial", with "material" being the least serious impact.


Whilst there may be "issues" in the business in the coming year, I was not left with the impression that it was likely to fall into losses. Given also the impact of 3D, ISTM that there is every chance of an earnings resurgence in 2011/12. It is hard to see why MBL's management would feel the need to hold a strategic review so soon after the previous one, except in the event that an MBO or similar deal is being considered - and the SR announcement does state:

"The strategic review is at a very early stage and may result in an offer being made for the Group as one of the possible outcomes..."

In the eventuality of an MBO, it is clearly necessary for an advisor such as KPMG to determine a "fair" price. Equally clearly, in such an eventuality, it would suit management's purposes to downplay the business's prospects. That makes it particularly hard to know how to interpret the trading statement.


I am not comfortable about the price paid for MBL's 15% stake in U-explore, given its early stage nature. However, Lisa stated that there was a strong shareholder agreement in place with U-Explore, giving MUBL greater rights than would be implied simply by a 15% shareholding (e.g. Board representation, joint projects). TA indicated that he had been following U-Explore's progress over the previous 12 months, before deciding to make a deal with the company. The deal was discussed by the Board. Matt Porter gave a useful explanation of GMV's positioning. GMV offers an online content hosting/distribution facility, i.e. a server farm and proprietary software, which retailers and others can use to offer a "white label" content download service. GMV does NOT attempt compete with iTunes but GMV's customers might. As such, it appears to be a direct analogue to MBL's physical media service, but in the online world: a very sensible offering to have.

Matt and the Board indicated that they'd be receptive to a shareholder presentation/demonstration in London, that dealt with GMV and U-Explore under Matt's stewardship. Such an event would not be "market sensitive" and was not precluded by the SR.



All I can conclude is that the current share price appears far too low to me: I do not think that MBL is on the verge of collapse and I'm happy to collect my dividend in the meantime. PC was asked and confirmed that there was no prospect of the declared dividend being rescinded. Hence I have no intention of selling at this price. So all I can do is wait & see what the outcome of the SR is. PC gave the impression that he did not expect it to be a protracted process.

Normally, in the event of an MBO, there is a committee of supposedly independent non-execs that agrees the price on behalf of all shareholders. It is extremely unfortunate that in MBL's case that committee will consist solely of PC. He did promise to me that in the event of an MBO he would ensure that the offered price was fair and reasonable. He did acknowledge that if it were not for the relatively high Board costs last year, reported EPS would have been higher*. He also indicated that MBL were hoping to appoint another non-exec in the not too distant future. So, if an MBO is offered, we will see whether PC is a man of his word - though, of course, such issues are matters of judgement.

Mark


*IMO, were MBL private, £0.5m would be a reasonable Board cost, rather than the £1.7m actually incurred last year. An extra £1.2m of PTP should translate into an extra 5p of EPS.

[shanklin] 21/10/2010 13:14

No problem Des.

I wasn't intending to be flippant, and whilst I've spoken to two people who attended the AGM, I am sure I have only heard the answers to a small proportion of the questions asked.

Your comments are interesting, particularly the one re U-Explore, where IMHO AIUI:
- there are some synergies with GMV, but it is perhaps difficult to be certain that in isolation it justified the level of investment
- the Board thought U-Explore might be huge and provided good risk/reward for their investment

Cheers, Martin

[meadow50] 21/10/2010 12:11

Excellent research and info from a team of committed posters here.Thanks guys.Pity the the company surrounds its dealings in fog and mystery.Pot of gold or can of worms?Impossible to tell as regards PIs but seems the directors will do OK whatever.
GLA

[shanklin] 21/10/2010 11:51

jeffian

Great stuff... not

FWIW, I have in the past e-mailed PC on the e-mail address I posted a few days ago, and whilst I didn't get a reply by e-mail, PC did phone me back the same day.

Cheers, Martin

[jeffian] 21/10/2010 11:48

Well it's certainly more than MBL were prepared to give me when I asked for LC's email (in her capacity as Company Secretary) to point out the error in the Proxy Cards. The receptionist told me to send my mail to the general "enquiries@..." address and it would be 'forwarded to LC'!! Anyway, email isn't an "unused channel", Martin, I've used it and didn't get a response either, so you'd better add that to your list.

8-)

[shanklin] 21/10/2010 11:40

Des

I guess if I'd posted LC's e-mail address after Davidosh's reply which includes

"TA is the director who introduced UXplore to the MBL board and so it is probably best to direct those questions in full to him or LC explaining that you would have attended the AGM but 9.30am on a Monday morning was not possible for you to do so."

you would not have decided to have a pop, but instead have accepted that I was adding value in providing a useful piece of information!

FWIW, and recognising that AFAIA you have never added any value re MUBL, it is perhaps worth stating that...

...The many questions raised by jeffian regarding U-Explore have not been answered:
- in the recent conference call
- in response to messages I have left on LC's phone, a phone she never appears to answer by picking it up or by responding to messages left on it
- in conversations I have had with PC, who seems unable to explain it
- at the AGM
- in any RNSes

Given the above, writing an e-mail containing the questions is perhaps the only unused channel in terms of seeking some answers, and one does need an e-mail address to be able to do this. And at least the lack of a response would be hard fact rather than hearsay.

Cheers, Martin

[davidosh] 21/10/2010 10:57

TA is the director who introduced UXplore to the MBL board and so it is probably best to direct those questions in full to him or LC explaining that you would have attended the AGM but 9.30am on a Monday morning was not possible for you to do so.

I am liaising with the KPMG advisor and Matt from GMV to be able to present to investors within the next month to provide some help in understanding the new business developments.

[shanklin] 21/10/2010 10:57

All good questions for

[e-mail]

[jeffian] 21/10/2010 10:51

david,
I don't know if you're teasing us with this 'Q1', 'Q2' stuff but you mention that over 20 questions were asked and discussed over a reasonably lengthy period and it would be very helpful to those of us who weren't able to make the meeting if you or someone else who was there could post a very brief résumé.

With regard to the trading statement relating to the existing business, I'm still struggling to understand how 2010/11 profits can be "materially behind" in the year when substantial new business has been added (Best Buy) unless like-for-like sales on existing contracts have fallen off a cliff. Any comment on that?

Also, was there any discussion of the U-explore deal which remains a complete mystery on so many levels - what was the rationale for the deal? what are the synergies? what business is each party likely to bring to the other? how was the business valued? why take a small minority holding? what return is MBL expecting on its investment and when? etc. etc.

[fft] 20/10/2010 14:42

Things to be careful about software is that sales can be fickle. I dont follow software sales on a weekly basis like i used to :-), but looking at the npd/charttrack report for 2009 (i have removed the Japanese part) there was quite a serious decline in 2009. Whether that was due to a lack of AAA games, i dont know, but the 2008 report (lower down), indicates that they were expecting some big releases during 2009. Of course, December is by far the best selling month, followed by November. With 19.4million units sold in December 2009 alone at a total software market value of £437million, over a quarter of the unit sales and revenue generated in 2009 came from sales during December.


Report for 2009

NEW YORK, TOKYO, LONDON, February 3, 2010 - According to recent findings from Top Global Markets, an integrated monthly report from leading providers of consumer and retail information in the video games industry, The NPD Group, GfK Chart-Track Limited and Enterbrain, Inc., combined video game software unit sales across the world's three largest games markets experienced a decline of 8 percent in calendar year 2009* (Jan.-Dec.), totaling 379.3 million units.

The declines were more modest in Japan, which experienced a 2 percent decline in software units (5 percent decline in console software and a 1 percent decline in portable game software). The United States and UK saw respective declines of 7 percent and 14 percent. In the U.S., console and portable software experienced respective declines of 7 percent and 8 percent, while UK units saw respective declines of 6 percent and 25 percent.

Continuing the trend from 2008, the overall gaming software market in 2009 declined in large part due to the shrinking PlayStation 2 software market, which experienced a 57 percent decrease across the top global markets in 2009 based on units (U.S. -56 percent; UK -67 percent; Japan -55 percent).


United Kingdom
"For the UK videogame home console software market it is clear that current generation systems suffered slight negative growth overall in 2009, even though PS3 and 360 both enjoyed record volume (and value) software sales for the year, and were the only formats to exhibit positive growth over 2008," said Dorian Bloch, Business Group Director, GfK Chart-Track Limited. "Growth on these platforms did not manage to offset the steep decline in PS2 software units (-67%), which in real terms was close to a decline of 4 million units. Also, the incredible performance exhibited by Nintendo's Wii in 2008 meant that Wii units fell back 10 percent, although remained the number one format in terms of units sold in 2009.

Within the portable market, it is clear that this is the reason for the overall console software decline. Nintendo DS volume (and value) sales in 2008 reached a high point brought about by massive, record-breaking DS Lite sales, and the corresponding sales of hit titles such as 'Dr Kawashima,' 'Mario & Sonic at the Olympics,' 'New Super Mario,' and 'Mario Kart DS.' Rolling on to 2009 saw much lower DS hardware sell-through and no new must-have DS titles at the top of the charts, apart from 'Professor Layton and Pandora's Box.' Sony's PSP suffered a similar fate, with few must-have titles arriving in 2009, and a continued decline in PSP hardware sales, ever since the sweet spot achieved in 2006 with the original PSP."


This is the report for 2008

NEW YORK, TOKYO, LONDON, February 2, 2009 – According to recent findings from Top Global Markets, an integrated monthly report from leading providers of consumer and retail information in the video games industry, The NPD Group, GfK Chart-Track Limited and Enterbrain, Inc., combined video game software unit sales across the world's three largest games markets experienced growth of 11 percent in calendar year 2008 (Jan.-Dec.), totaling 409.9 million units versus the 367.7 million units sold across these markets in 2007.

The increase in growth comes from both United States and UK, with respective increases of 15 percent and 26 percent. Japan did not fare as well, experiencing a 13 percent decline in 2008, which can largely be attributed to a decline in portable software, followed by console software.

While Japan's overall gaming software market in 2008 declined, it wasn't due to poor sales on any current-generation hardware platform. Instead, the decline in Japan was driven by the shrinking PlayStation 2 software market, which experienced a 46 percent decrease in 2008 based on units. According to Enterbrain, Inc., sales for Nintendo DS' Touch Generation software series was also slightly down in 2008.

Looking at the Japanese video game software market by console platform, each system (Sony's PlayStation 3, Nintendo's Wii, and Microsoft's Xbox 360) experienced positive year-over-year growth.

"Looking ahead to 2009, a string of star titles are lined up to hit the market, including DS's Dragon Quest IX: Hoshizora no Mamoribito," said Ricky K Tanimoto, Global Marketing Analyst, Enterbrain, Inc. "There are also big console titles scheduled for release in 2009, such as Monster Hunter 3 and Final Fantasy XIII -- leading us to anticipate the console software market will fuel sales of this year's gaming market."

The United Kingdom experienced the largest aggregate growth as well as category growth, with console software experiencing a 38 percent gain, and portable software increasing 6 percent. Growth in the United States saw console software growth of 22 percent and portable software growth of 2 percent.

"There are some incredible statistics within the Top Global Markets Report that highlight the differences between the three major markets in the world," said Dorian Bloch, Business Group Director, GfK Chart-Track Limited. "In fact, UK console videogame software units are more than double what was achieved in 2003, which just shows how fast the UK market has been growing. Because of this amazing growth and coupled with the downtown currently being experienced in Japan, the UK market has for the first time overtaken Japan as the No2 world market. Although still behind on revenue, the gap has narrowed considerably and it will be interesting to see how things develop during 2009."

Continuing the growth of the Video Game industry over the past few years, 2008 software unit sales in the U.S. also saw an increase of 15 percent over 2007, selling over 268.4 million units for the year; nearly 36 million more units than last year," said Anita Frazier, industry analyst, The NPD Group. "Only two months in 2008 saw a decline in unit sales in the U.S., with one due in large part to the release of 360 Halo 3 in Sept'07 and the other due to an additional week in the Jan'07 retail calendar."

[davidosh] 20/10/2010 14:26

Miamisteve...There are new games formats on the way and a big release line up of titles in the run up to Christmas....

(Gamers have generally been straved of any decent releases for most of this year but look at what is coming or has just been released since Q2 ended.)



Fifa 11 1/10
Halo Reach 14/10
Medal of Honor 15/10
Fallout New Vegas 22/10
Fable III 29/10

Call of Duty 9/11
Assassins Creed: Brotherhood 19/11
Gran Turismo 5 5/11
World of Warcraft: Cataclysm

And not fogetting the launch of....

Xbox 360 Xinect on 10/11

(Sony Move has just been released)

That is a collossal line up of "must have" franchises and peripherals in the run up to Christmas (and ignores all the other titles being launched).

Then you have the DS 3D due out early next year.


If nearly half of the company turnover is based on gaming and computer game peripherals then the next few months look quite exciting to me and certainly the potential for a dramatic turnaround so long as Morrisons and other MBL customers get their share of the market sales.